Luxury fashion group Capri Holdings’ third-quarter net income declined more than half from the previous year, which according to an analyst, reflects the Michael Kors brand losing luster.
The company reported net income fell 53.3 per cent year over year to $105 million and revenue slid 5.6 per cent to $1.43 billion.
“The bottom line provides no relief with net income down by 53.3 per cent off the back of a sharp downtick in margins thanks to higher discounting needed to sell through product. This, in turn, reflects the generally weak market position of the Michael Kors brand,” said GlobalData MD Neil Saunders.
“While some channels, such as department stores, do Michael Kors no favors with their standards of presentation, this is exacerbated by the fact the brand itself remains weak and somewhat tarnished by ubiquity.”
Capri said that Michael Kors revenue fell 5.6 per cent to $1.03 billion, attributing it to softening consumer demand mainly in the Americas and issues related to the Michael Kors Americas e-commerce implementation.
Meanwhile, Jimmy Choo revenue declined 1.2 per cent to $166 million and Versace revenue fell 8.8 per cent to $227 million, but Saunders expressed optimism about the recovery of both brands.
“While Versace doesn’t get a complete pass for the poor numbers, we are more inclined to accept that some of the deterioration is the fault of a softening luxury market where core consumers are trimming their spending,” said Saunders.
He added that Versace “remains a label of interest and significance” and can bounce back immediately once economic conditions have improved. A stronger demand in Asia for the brand helped offset the impact of the sluggish US footwear market.
“Holiday marketing was reasonable, but we feel it lacked the glamor and sparkle of other brands in the space,” said Saunders.
Capri, on the other hand, remains positive about its global expansion to be brought by its merger with Tapestry, expected to be completed this year.
“This combination will deliver value to our shareholders as well as provide new opportunities for our dedicated employees around the world as Capri Holdings becomes part of a larger and more diversified company,” said Capri Holdings chairman and CEO John D Idol.
Further reading: What the Tapestry-Capri mega-merger means for the top end of town
